Thursday, June 15, 2006

Google ads

One Google ad in my gmail tells me:
Why You Shouldn't Invest?

The only realistic way to return
5536% in 18 months with one stock. I follow the link and find this:
Through a combination of the 3 proven investment strategies, you would find companies like the following before they skyrocketed:

Strategy (#1 , #2 , #3)

*Medifast, Inc. -- 5536% Profit in just 18 Months
*Ask Jeeves, Inc. -- 1395% Profit in just 8 Months
*SCO Group, Inc. -- 1382% Profit in just 11 Months
The three strategies are "growth", "value", and "insider trading". It appears that they've just pulled some of the highest-performing stocks ever and listed them as results of the proven investment strategies.

So many things are running through my head...efficient markets...survivorship bias...what does economic theory tell me? Contradicting things. On one hand, it's painfully obvious that this is total crap. If I had invested in the whole market in the 90's, I too could claim that I was invested in a stock that returned 5536%. Rational people use the same model I do: the market is essentially random, so returns from any investment tips this company gives will be no better than average, thanks to mean reversion, and probably worse, thanks to stupidity. On the other hand, it appears that the company pushing the ad is somewhat successful. Thus (some) people must not have rational expectations.


Anonymous Dick said...

You nailed that fairy tale...

12:41 PM  

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